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Toronto Market Report April-May 2018

17 April 2018

Remax-Condos-Plus

SALES COMMENTARY

Yes, sales on the Toronto Real Estate Board for March were down 39% from March of 2017. Last month we said to: ‘get used to it for the next couple of months’. Real estate sales are seasonal. One measure of the strength of the market is to measure the month over month sales increase at this time of year. For 2018, March sales were 40% higher than February. For 2017 the month over month increase was 50%. But when you look at 2016 and 2015, more normal years, the increases were 36% and 41%. What we are saying is that we will not know where sales are headed until May. A late spring weather wise means we can expect the spring market to run to the end of July.

In terms of prices, we can see the impact of a lack of ‘new’ listings. ‘New’ listings for March are 12% lower than in 2017 and are equal to those of 2016. Forecasts that sellers may be forced to sell because they cannot afford their mortgage payments seem a little premature. In the City of Toronto, low rise prices are equal to those of March last year. Condos are up by 15%. Prices in the ‘905’ area down by 2-5% from March of last year, except for York Region where the low-rise market is down by 13%.

Turning to the Downtown condo market, sales were down by 30% in March over March of 2017. In the Humber Bay market, the sales decline was only 13%. Most people who study markets believe that lower sales are a forerunner of lower prices (sellers reduce prices in order to sell). But in real estate sellers who do not get their price just wait or cancel their listing. So, this rationale does not hold true. In 2018 ‘new’ listings Downtown were 43% lower in 2017. In Humber Bay, ‘new’ listings for March were 28% lower than in 2017. This reduction in listings has produced prices accelerating by 15% annually as of March. This is the second year of double digit increases for condos and this is not only unsustainable, but we believe this is the biggest problem in the Toronto real estate market! Prices of a $1,000 psf are common for condos and this means that affordability can only be achieved by: 1) smaller condo units going forward; and 2) downtown owners and renters going carless! That means more bike lanes too.

Toronto MLS Sales

This chart plots monthly MLS® sales for the current year and the previous three years. The recurring seasonal trend can be examined along with the comparisons to previous years for each month.Source: Toronto Real Estate Board

770 BAY STREET: THE LUMIERE CONDOS

Bay Street seems to be the favourite street for condos – and for being a price leader. This month we looked at sales at the Lumiere Condos at 770 Bay. This is a 32-story building just south of College. It was registered in 2011 and is within easy walking distance of two universities and the hospitals on University Ave. Our one-bedroom unit has a den, balcony, parking but no locker. Located on a high floor with great views, it sold in 2012 for $473,000. The same unit resold in late 2017 for $740,000. That is an annual increase of over 9% in the last five plus years. At just over 600 sf, that works out to a price point of $1200 psf! The two-bedroom unit has two baths, along with parking, balcony, and no locker. It is on a mid-floor without prime views and was sold by the builder for $505,000 in 2009 with occupancy in 2010. The unit resold in 2015 for $640,000 – that works out to an annual increase of just under 5%. It resold again in late 2017 for $800,000 – an increase in the last two and half years of 12%. This last price was at $920 psf. The building has 355 units but currently there are none for sale. In a normal market, you would expect 5-10 units for sale..

RENTAL COMMENTARY

Last month we saw 800 units leased in the Downtown market and we wondered if the rental market was slowing down due to tenants ‘staying put’ to take advantage of rent controls. This month, the number of units leased jumped by 40% to over 1100. We are at a loss to explain.In terms of rental rates, studios held firm at $1700 per month. The basic one bedroom without parking again averaged $2,000 per month with the top end – parking and den at $2300+ per month. The entry point for the two-bedroom market moved $100 per month higher – now over $2600. Adding a den and parking will move the rent up to $3300. Again, there are very few three-bedroom units available and they are renting for over $4,000 per month on average.Landlord/investors have been aggressive in trying to get as high a rent as possible at the outset. This has resulted in a number of list price reductions but still rents for ‘available’ units are over 10% higher than last year – an ongoing consequence from rent controls.All new leases written after April 30 (it does not matter what the occupancy date is) must be completed on a new Standard Lease created by the Government of Ontario. This will not change rental market conditions, but it should help to reduce tenant and landlord misconceptions.The need for real estate agents will still be critical to the process. The offer is only a small part of the process. For landlords, the vetting of tenants and the correct pricing of units has never been more important. For tenants, they need to know that their deposits are protected, and that accurate information is provided about their landlord.

GTA Condo Apartment Vacancy Rate

This chart plots the vacancy rate of the Greater Toronto Area for the first quarter of 2018.source:The Toronto Real Estate Board

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